Reading the Tea Leaves
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© 2006-2017 Kasturi & Sons Ltd. -vijay kumar [email protected] - EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE CHENNAI THE HINDU 8 EDITORIAL MONDAY, SEPTEMBER 18, 2017 EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE Reading the tea leaves The emerging India-Japan alignment sets the stage for the reordering of the Asian strategic landscape Nuclear Suppliers Group last year, memorandum on enhancing de- ensuring that no language relating fence and technology/security co- to Pakistan-based terrorist groups operation was signed and talks on Time for caution found mention in the BRICS sum- acquiring the amphibious mari- mit in Goa and preventing the in- time surveillance ShinMaywa US-2i As the world looks to end the era clusion of Masood Azhar from be- began in 2013. Trilateral dialogue of easy money, India must be prepared rakesh sood ing designated as a terrorist by the involving both the U.S. and Japan UN Security Council by exercising and covering strategic issues was ndia’s external balance sheet may have improved sig- a veto. elevated to ministerial level in nicantly since the infamous taper tantrum of 2013, n history, dening moments like Since 1988, India has followed a 2014. Japanese participation in the Ibut there are now signs that warrant more caution 9/11 that can be identied as consistent China policy based on Malabar exercises, suspended be- from policymakers. Last week, the current account de- Imarkers of change are rare. putting aside the boundary dispute cause of Chinese protests, was re- cit (CAD) widened to a four-year high of $14.3 billion in More often, there are trend lines of and developing other aspects of stored in 2015. Once the agreement the rst quarter of the current nancial year, standing slow-moving geopolitical changes the relationship in the expectation for the 12 US-2i aircraft is con- at 2.4% of gross domestic product, compared to 0.1% which come together at a particu- that this would create mutual trust cluded with a follow-up acquisition lar moment in time resulting in an and enable a boundary settlement. as part of Make in India, the stra- last year. The widening CAD was driven by a greater in- inexion point. Reading the tea However, the gap between India tegic relationship will begin to ac- crease in merchandise imports than exports. A strong leaves indicates that 2017 may well and China has grown, both in eco- quire critical mass. capital account surplus, however, has helped the coun- be the year which marked the re- nomic and military terms, and However the strategic partner- try pay for its import bills without much trouble. For- ordering of the Asian strategic with it has emerged a more assert- ship needs stronger economic ties. eign investors starved of yield have been stepping up landscape. GETTY IMAGES/ISTOCKPHOTO ive China. The shared vision of an Today, India-Japan trade lan- their investments in India, which remains one of the China is the predominant power benets of the U.S. security um- Asian century with a rising India guishes at around $15 billion, a few places oering higher yields. Compared to last year, Two trend lines and must be treated as such. brella on the cheap. and rising China is long past. Mr. quarter of trade with China while The two slow moving trend lines Even though China has been a Recent nuclear and long-range Modi’s personal diplomacy with Japan-China trade is around $300 net FDI almost doubled to $7.2 billion in the rst clearly discernible since the Cold beneciary of the U.S.-led global missile tests by North Korea have Mr. Xi has had little inuence on billion. Therefore, the primary fo- quarter, while net portfolio investment jumped about War ended a quarter century ago order, it is impatient that it does added to South Korean and Japan- changing Chinese attitudes or be- cus during the recent visit has been six times to $12.5 billion. The strong inow of foreign are the shift of the geopolitical not enjoy a position that it feels it ese anxieties. Japan has been par- haviour. After Doklam, there is - on economic aspects. The Mum- capital has also led to a signicant increase in foreign re- centre of gravity from the Euro-At- deserves, especially in the Bretton ticularly rattled by the two missiles nally a consensus that the old bai-Ahmedabad high speed rail serve holdings, thanks to the Reserve Bank of India lantic to the Indo-Pacic region Woods institutions. During the last red across Hokkaido. Given the China policy does not serve our na- corridor is more than symbolism, which has been busy buying dollars to weaken the ru- and the rise of China. The U.S. ‘re- ve years, it has set about creating U.S. push for more sanctions that tional interests and a review is long in demonstrating that high-cost Ja- pee. Forex reserves were at an all-time high of $400.7 balancing’ announced in 2011 was a new set of institutions (the Asian depend on China for implementa- overdue. panese technology is viable in de- a belated recognition of these Infrastructure Investment Bank tion, most Japanese reluctantly ad- veloping countries and that India billion for the week ending September 8, while the ru- changes, driven home by the im- and the New Development Bank) mit that North Korea’s nuclear and A new strategic landscape has the absorption capacity to pee has appreciated by over 6% against the dollar this pact of the 2008 nancial crisis. and launched the Belt and Road missile capability is unlikely to be It is against this backdrop that Ja- master it. Completing it in ve year. Low global oil prices over the last two years have Most of the rivalries are being Initiative (BRI) to create a new trad- dismantled any time soon. panese Prime Minister Shinzō years is a management challenge also helped contain a good portion of its import bills. played out in the crowded geopolit- ing infrastructure that reects Chi- Another signicant develop- Abe’s visit to India took place last but the bigger challenge will be to All this might change with the impending tightening ical space of the Indo-Pacic, and na’s centrality as the largest trad- ment was the Doklam stand-o week. The contours of a new rela- transfer the know-how of best of monetary policy by the U.S. Federal Reserve and Asian economies now account for ing nation. between India and China that las- tionship were dened during Mr. practices to other sectors of the other central banks. After all, emerging Asian markets more than half of global GDP and The BRI is also complemented ted from June to August. The Abe’s earlier tenure, in 2006-07, economy. becoming larger in coming years. by a growing Chinese naval pres- Chinese playbook followed the es- when annual summits were intro- Another major initiative is the have been the biggest beneciaries of loose monetary China’s rise is reected in a ence in the Indian Ocean. Begin- tablished pattern — creating a phys- duced, the relationship became a recently launched Asia-Africa policy in the West, so any change in stance would most more assertive China. According to ning in 2009, the PLA Navy started ical presence followed by ‘Special Strategic and Global Part- Growth Corridor to build con- denitely aect them. Indian companies, for instance, President Xi Jinping’s ‘two guides’ rotating three ship task forces sharpened rhetoric, together be- nership’, Japan was invited to join nectivity for which Japan has com- have aggressively tapped into the market for rupee-de- policy announced in February, through the Indian Ocean as part coming an exercise in coercive dip- in the Malabar naval exercises and mitted $30 billion and India $10 bil- nominated foreign debt, which can work against them China should guide ‘the shaping of of the anti-piracy task force o the lomacy. This worked in pushing a Joint Declaration on Security Co- lion. This adds a critical dimension if the ow of foreign capital turns volatile. The RBI has the new world order’ and safe- Somalia coast. Visits by nuclear at- the nine-dash line in the South operation was concluded. Since to the ‘global partnership’ between been regulating the amount and quality of such borrow- guarding ‘international security’. tack submarines to littoral ports China Sea with the Philippines and then, signicant content has been the two countries. However, to Much has changed during the last began to take place. In addition to Vietnam even as China built addi- added. make this productive, India needs ings, so it may seem like things are under control for quarter century when Deng Xiaop- Gwadar, China is now converting tional facilities on reclaimed land A singular achievement was the to change its style of implementing now. Further, India’s total external debt declined by ing advised China ‘to observe the supply facility at Djibouti into a in the area. India, however, chose conclusion of the agreement for projects abroad, most of which 2.7% during the nancial year 2016-17, standing at calmly, secure its